Macau Business Daily, Nov 5, 2014

MOP 6.00

Page 2

| Anti-corruption policy prolonging VIP crisis in Macau Page 4

Gaming revenues drop for fifth month

Number 660 Wednesday November 5, 2014

Publisher: Paulo A. Azevedo

Closing editor: Sara Farr

HSBC profits up in Q3

I

t’s worse than feared. Macau casinos raked in MOP28 billion (US$3.5 billion) in October. A whopping 23.2 percent less than a year ago. The biggest drop since the financial crisis. And the fifth straight month of decelerating growth.

One redeeming feature is that October 2013 was the second-best month ever for the gaming industry. Nevertheless, the portents for November and December remain poor

Year III

Page 5

Wide gap

HSI - Movers November 4

Name

Income disparity is widening.

Construction workers’ salaries have increased considerably since 2010.

But while locals are earning 21.7 percent more, non-residents’ salaries deflated. In Q3, a gaping 54 percent separated them. The disparity for those holding a specialised post has reached a staggering 75 percent

Page

6

%Day

COSCO Pacific Ltd

2.32

China Merchants Hold

2.22

China Shenhua Energy

1.17

Hong Kong Exchanges

1.17

Bank of Communicatio

1.04

Cheung Kong Holdings

-1.67

Wharf Holdings Ltd/T

-1.86

Want Want China Hol

-2.33

Galaxy Entertainment

-2.78

Sands China Ltd

-3.31

Source: Bloomberg

I SSN 2226-8294

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Brought to you by

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www.macaubusinessdaily.com

Page 2

Pizza Express in no great hurry

Mixing politics with profits

Pizza Express is on the way. Expansion plans for China include Macau. Hong Kong MD Justin Kennedy says the British restaurant chain is currently searching for the right site. But will not rush into the market. The chain operates in Europe, the Middle East and Asia. First impressions are important, he says, “to amaze the city”

The principal Shanghai and Hong Kong Stock Exchange authorities say it’s a go. Everything’s ready to start trading through the link. China’s leaders, however, remain silent. HKSAR CE CY Leung says “soon”. Meanwhile, markets are harvesting losses. Fingers are pointed at the unstable environment

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November 5, 2014

Macau

T R O P RE

Japan & South Korea selling like hotcakes for Macau travellers The number of Macau residents travelling to the north Asian countries soared in the first nine months, fuelled by the craze for Korean culture and the cheaper value of the Japanese yen Kam Leong

kamleong@macaubusienssdaily.com

T

his year, South Korea and Japan have been two of the hottest destinations for Macau residents in addition to Thailand.

Both of the north Asian countries received 35 percent more Macau tourists in the first nine months of the year, compared to the same period last year. Travel agents said the popular Korean culture and the dropping value of the Japanese yen are the major factors.

From January to September, some 43,000 Macau residents travelled to South Korea while another 20,400 visited Japan, either on tours arranged by travel agencies or through individual arrangements, according to the Statistic and Census Service Bureau (DSEC).

“The increase in the number of Macau residents to South Korea is due to strong Korean Fever; in addition,

In addition to immediate users, many people want to buy yen in advance when the currency declines to a cheaper rate although they are only planning to go there later P&W Money Changer Ltd

more flights available between Macau and South Korea is another reason.

For example, Air Macau increased its daily flights between Korea to twice a day, while more flights are also offered by other airlines such as Jin Air,” the general manager of travel agency EGL Tours ( Macau) Co Ltd., Sabrina Iong Ut Iong, told Business Daily in a phone interview yesterday.

In addition, Mr. Siu Chi Shing, the general manager of Hong Thai Travel Services (Macau) Ltd., told Business Daily yesterday that South Korea can offer a variety of interesting spots in different seasons to attract tourists, as well as attracting them with its pop culture.

Japan tourism boosted by yen Meanwhile, both agents told Business Daily that the increase in number of Macau residents visiting Japan is due to decline of the yen.

“Since the beginning of the year, the yen has kept falling. Although the Japanese authorities have increased consumption tax, the tax can still be compensated for by the cheap exchange rate [between Hong Kong dollars and the yen],” said Ms. Iong.

Mr. Siu, on the other hand, said residents may think Japan is more worth going to than Singapore or Malaysia, following the drop in the rate of the yen.

In the first nine months of the year, the yen has declined 9.6 percent, compared to the same period last year. Last Friday, the yen dropped to its lowest point in 7 years, requiring just HK$6.84 - HK$6.8 for 100 yen.

Asked by Business Daily whether the latest record-breaking low rate of the yen had attracted more customers

for the Christmas holidays, both agents said no as the tours to Japan at Christmas were almost sold out two months ago, travel agencies have to pay a deposit for flights and hotels two months before, as well.

Getting yen in advance In fact, the dropping value of the yen has also increased demand for yen cash as many residents want to exchange the currency before their trips.

P&W Money Changer Ltd, a currency exchange company in Macau, told Business Daily that Japanese yen is usually a hot item for the travel season. The company noted, however, that demands for the currency will always grow whenever the rate drops significantly.

“In addition to immediate users, many people want to buy yen in advance when the currency declines to a cheaper rate although they are only planning to go there later,” the company said, remarking that its stores have almost sold out of yen following the latest sharp decline in the rate.

On Sunday, two days after yen dropped below HK$7, Business Daily contacted a total of 15 currency exchange stores to check on their availability of yen. These stores are located in Macau International Airport (MIA), Taipa, Central Area, Areia Preta as well as near the Border Gate.

Only four said yen was available - two in the airport offering an exchange rate of HK$7.5 for 100 yen, and two near the Border Gate, offering HK$7.2 for 100 yen.

Continuing trend?

Mr. Siu believes the trend to visit South Korea will last until

next year. Although South Korea replaced Thailand as the most popular destination for Macau residents in the first nine months of the year, Ms. Iong noted that the number of tourists to Thailand is going up again.

“The decline in the number of tourists to Thailand was because of the unstable political situation in May, which led airlines such as Thai Smile Airways to cut down one flight between Macau and Thailand,” Ms. Iong said. “However, since the situation is stablising again we can see that the numbers of Macau tourists to Thailand is increasing. In addition, since October 26, Thai Smile Airways has also resumed the flight that was halted earlier.”

In fact, although the numbers to Thailand dropped by more than 30 percent year-on-year in the first nine months, it remained the second most popular destination for Macau tourists, followed by South Korea and Japan, respectively, excluding Mainland China, Hong Kong and Taiwan.

For now, Japan and Korea are very likely to retain their ‘most popular’ positions for the upcoming Christmas holidays. Mr. Siu predicts that tours of his company to the two countries may register growth of 20 percent yearon-year in the holiday, while Ms. Iong believes growth in her company will also be up ten and a few percent year-on-year.

In the first nine months, the two travel agencies have enjoyed the fruits of the trend. According to Mr. Siu, Hong Thai’s tours to South Korea and Japan increased by some 15 percent and 18 percent year-on-year in the nine months, respectively. Ms. Iong said EGL’s tours to the two countries also posted increases - of 10 percent and 15 percent year-onyear, respectively - during the period.

3

November 5, 2014

Macau

Black taxis to the rescue Yellow taxis will cease operation tomorrow with the expiration of the government contract. The Transport Bureau said it’s confident that taxi services in Macau won’t be affected too much as black taxis will fill the void Joanne Kuai

joannekuai@macaubusinessdaily.com

T

he Transport Bureau paid an inspection visit to two taxi dispatch stations yesterday.

The stations belong to two different taxi drivers associations. For a small membership fee taxi drivers can have equipment such as radio and GPS installed so that the taxis can provide on-call services.

Macau Automobile Workers Association director Raymond Leng Sai Hou said that over 400 taxis (of more than 1,000 in total) have joined their network, including 100 of the 200 new taxis gradually being phased into operation. They have four fixed phone lines and receive around a dozen phone-ins per hour which adds up to more than 1,000 a day.

On average, they can provide on-call services to up to 400 to 500 callers.

At another taxi dispatch station, the president of the Macau Taxi Drivers Mutual Help Association, Kuok Leong Song, said that their dispatch centre has been in use since 2008. One third of Macau’s black taxis have already joined their service.

They receive around 400 phone-ins

a day and can successfully provide services to 50 percent of the callers.

Mr. Kuok added that he believes additional charges for on-call services are necessary - “the higher, the better” with as least 10 patacas charged on top of the original taxi fare. The Association said it would discuss the issue with the

HSBC profits up marginally in Q3

H

SBC Holdings PLC (HSBC) has posted a slight increase of 2 percent year-on-year in its profits before tax for the third quarter of the year, reaching US$4.60 billion (MOP36.8 billion). For the first nine months of the year, however, profits before tax decreased by 9 percent year-on-year during the first nine months.

According to the bank’s filing with the Hong Kong Stock Exchange, HSBC reckons that the slight growth in profit before tax during the quarter was due to increased operating expenses, which increased by 15 percent yearon-year, totalling US$11 million, excluding significant items operating expenses.

“Cost inflation in a number of our markets and a number of significant items also contributed additional costs. As a consequence, operating expenses are now higher than before.

We are committed to achieving additional sustainable savings by further streamlining our processes and procedures,” the Chief Executive of HSBC, Stuart Gulliver, remarked.

On the other hand, the Group’s revenue increased by 5 percent yearon-year during the third quarter, reaching US$15.8 billion. The growth was notable especially in Commercial Banking and Global Banking, and Hong Kong and UK markets, HSBC said.

In the Hong Kong market, profits before taxes of HSBC during the quarter reached more than US$1.87 billion, of which some US$927million was gained from retail banking and wealth management, while profits from commercial banking in the Special Administrative Region accounted for some US$576 million.

Meanwhile, in the first nine months of the year, profits before taxes of the Group dropped to US$16.9 billion, some US$1.7 billion lower than the same period of last year. In addition, the revenue of the Group in the nine months also posted a decline of 5 percent year-on-year, which was partly due to lower gains from disposals and reclassifications, according to the filing.

K.L.

government once the taxi passenger transport law comes into effect.

Lo Seng Chi, Chief of the Transport Management Department of the Transport Bureau, said that currently there were 20 out of 200 new taxis on the road, and expects a total of 50 to be put into use by the

end of the month, with another 50 in December. The rest would join and start running on the roads of Macau in January 2015.

Mr. Lo added that the yellow taxis ceasing service wouldn’t cause such a big impact since according to their monitoring data, only around 20 yellow taxis are providing pure on-call services. Regarding whether there would be more taxi licences issued next year, he said that the Transport Bureau has commissioned academic organisations to research the issue taking into account the number of taxis to be balanced due to the demand of the market as well as the human resources in Macau.

He believes there is room to increase the number of taxis but currently they are reviewing the overall taxi services.

Mr. Lo disclosed that they would finish the draft of the taxi passenger transport law by the end of the year, listening to more opinions from society as well as studying the experiences of neighbouring regions. The relevant regulations and legislation would be tailored to Macau’s reality.

4

November 5, 2014

Macau Brown appointed Imperial Pacific’s Saipan resort CEO Imperial Pacific International Holdings Ltd, an investor in the Hengsheng Group, one of Macau’s largest junket operators, informed the Hong Kong Stock Exchange on Monday night that it was appointing veteran casino executive Mark Anthony Brown as president and chief executive officer of the company’s US$7.1 billion (HK$55.1 billion) casino resort project on Saipan island with effect from November 10. Mr. Brown resigned as CEO of NagaWorld Ltd on October 26 having carried out his duties since December last year. He was the president of Sands Macao and of The Venetian MacaoResort-Hotel from April 2006 to April 2009.

Institutionalised anti-corruption policy prolonging VIP crisis in Macau Investors predict a delay in high rollers’ recovery here and admit VIP segment revenues could fall even further. Macau’s competitors - like Cambodia, South Korea and the Philippines - are the main beneficiaries as Beijing takes a hard line Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

O

ne of the first side effects of the new anti-corruption agency announced this week by the Chinese Government is already known: it’s impact on Macau casinos and their VIP customers.

After two years, President Xi Jinping is taking the anti-graft campaign even further and sending a signal that fighting corruption is a permanent axis of its mandate and not just a temporary sop. The fight against corruption in China will now be conducted by a high-level office run by a top prosecutor under the Supreme People’s Procurator. It will substitute the old cabinet that, according to Chinese media, had too little power and no means to fight corruption.

“In our view, this represents the institutionalisation of the anticorruption drive”, Union Gaming said yesterday. The brokerage firm also added that the new agency “suggests that the anti-corruption drive is far from over and is likely to continue to impair Macau’s VIP market for a

significant period of time”.

The crackdown on corruption by Beijing has intensified this year and Macau, the only place in China where gambling is legal, has suffered its side effects as rich mainland gamblers decide to adopt more discrete behaviour, spending less or playing elsewhere in destinations such as Las Vegas and Singapore. As operators here also started to move VIP tables to mass floors, the combined effect with the anti-graft campaign has been a plunge in high roller revenues reaching the double digits.

A ‘gift’ to competition But as Beijing takes a hard line on corruption and lavish spending with the new agency – that will have more people and means to investigate, and likely new cases and arrests following – investors are predicting that VIP recovery in Macau will take longer than expected. ‘This could, in turn, delay a VIP recovery in Macau, or could represent another leg down

Corporate IFT Heritage Management students promote Drunken Dragon Festival Third-year students of IFT’s Heritage Management programme are organising a heritage interpretation of the Drunken Dragon Festival. The event - entitled ‘Dancing with the Drunken Dragon: A Festival of Togetherness’ - takes place at 10:00am on November 18 in the Grand Hall of IFT. “Using animation and interacting activities, the event aims to enhance public awareness and knowledge of the Drunken Dragon and Lion Dance Festivals, a precious intangible cultural heritage of Macau,” students said in a statement.

IFT’s heritage management students have been organising public events every year since 2007 to communicate the importance and value of Macau’s cultural heritage. This year’s event - which students say “promises to present its audience with exciting and unique stories of the Festival” - is based on the concept of “heritage interpretation” and presents the history and meaning of the Drunken Dragon and Lion Dance Festivals. Tickets cost MOP20, the proceeds of which will go towards charity.

with respect to VIP trends should prosecutions escalate materially’, Union Gaming wrote in its note to clients.

Only two weeks ago, Union Gaming downgraded the outlook for all six gaming operators in Macau as the VIP segment, responsible for 60 percent of all revenues here, continues its dive, with weakness likely to last well into 2015.

‘We remain comfortable with our current cautious outlook on Macau, as we do not yet see the potential inflection point on the horizon’, says Union Gaming. The brokerage firm emphasised that with the anticorruption policy hanging over Macau some other Asian destinations are likely to benefit. ‘We believe the beneficiaries of the anti-corruption drive in mainland China will be other regional jurisdictions (Cambodia, Philippines, South Korea, etc.) and would point to NagaCorp as a regional growth leader as the company layers

on incremental Chinese business (both mass and VIP) on the heels of several ongoing initiatives that are already beginning to materialise’.

The hunt Since being launched at the end of 2012, more than 75,000 party members have been investigated under Xi Jinping’s anti-graft policy, with 690 named publicly, ending the political careers of every official accused, even before any court trial, said the South China Morning Post this week. A later phase of the campaign focusing on signs of lavish spending and extravaganza displayed

by Chinese officials and businessmen is a hunt that has directly affected VIP customers in Macau, especially this year. The highest profile probe to date is of Zhou Yongkang, a former member of the all-powerful Politburo Standing Committee, and once overlord of policing and justice.

Macau Gaming Revenues Outlook Var. % (Year-on-year) 4Q14

2014

2015

VIP

-29

-10

3

Mass Tables

-5

20

13

Slot/ Electronic Table Games

-9

3

6

Total

-21

-1

7

Source: Union Gaming

5

November 5, 2014

Macau Former DICJ official joins Sinogreen

D

Gross gaming revenue plummets 23.2 percent Gross gaming revenue has shrunk for five consecutive months, with October setting a new record for the largest drop in year-on-year terms. Sands China seized the leadership in terms of market share but even Sheldon Adelson’s company has reason to be cautious as this is the largest drop ever registered since the financial crisis of 2007/2008

aniel Domingos António, a former inspector advisor with the Gaming Inspection and Coordination Bureau (DICJ), has joined Hong Kong-listed Sinogreen Energy International Group Ltd as an independent non-executive director, while veteran Macau junket operator Jack Lam Yin Lok has replaced Chau Chit as the chairman of the company in a major board reshuffle, an announcement filed with Hong Kong Stock Exchange late Monday reads. Along with Mr. António, Mr. Kwok Chi Chung, formerly the first head of gaming-related and economic crimes investigation department at the Judiciary Police, has joined Sinogreen Energy as an independent non-executive director.

Following a share subscription completed in September, Jimei Group Ltd’s chairman Mr. Jack Lam and his associates have assumed control of 65.85 percent of Sinogreen Energy’s shares. An October 17 filing, however, noted that Mr. Lam’s bid to fully take over Sinogreen Energy’s capital had failed.

João Santos Filipe

jsfilipe@macaubusinessdaily.com

M

acau’s gross gaming revenue sank a record 23.2 percent during October, making it the largest drop ever to be registered in the Special Administrative Region, since the government started publishing monthly results in 2005.

According to the data announced yesterday by the Gaming Inspection and Coordination Bureau (DICJ) during October casinos in Macau pulled in MOP28 billion (US$3.5 billion), while during the first 10 months of 2013 they generated a gross gaming revenue (GGR) of MOP36.6 billion (US$4.6 billion).

The 23.2 percent plunge is worse than expected by gaming analysts that were predicting a fall between 21 and 23 percent. However, the results announced are not a surprise, as last Monday the Secretary of Economy and Finance said the decrease in gaming revenues would exceed 20 percent.

The fact that last month’s data comes off a high base, as October 2013 was the second-best month for the gaming industry (MOP36.6 billion), only behind this year’s February (MOP38 billion/US$4.8 billion), partially explains the 23.2 percent drop.

The previous record fall was set in June 2009, when gross gaming revenues decreased 17.4 percent at the time to an amount of MOP8.3 billion (US$1 billion). In the aftermath of the financial crisis of 2007/2008, GGR decreased for seven consecutive months, from December 2008 to June 2009.

As for the current year, this is the fifth month in a row that gross gaming revenues shrank in year-onyear terms. From July onwards, the trend has been for the pace of the drop of GGR to increase steadily, as in July it decreased 3.6 percent,

Market Share Per Operator Jun

Jul

Aug

Sept

Oct

24.90%

24.10%

22.40%

20.90%

23.50%

22%

23.10%

24.60%

21.80%

23.70%

Galaxy

21.10%

20.60%

21%

22.90%

21.40%

MPEL

12.20%

12.40%

13%

12.70%

14.30%

MGM

10.30%

8.70%

8.90%

10.80%

8.20%

Wynn

9.50%

11.10%

10.10%

10.90%

8.90%

Total

100%

100%

100%

100%

100%

SJM Sands China

then 6.1 percent in August, 11.7 percent in September and last month 23.3 percent.

According to Union Gaming Research, the trend is for GGR to continue to decline for the rest of the year, which would result in a 2 percent drop in yearly terms from 2013 to 2014.

‘Assuming that November and December look more like September (e.g.) in line with the low watermark of about MOP25.5 billion) we currently expect declines of 16 percent and 24 percent, respectively, to round out the year. This would result in total 2014 GGR down 2 percent to MOP355 billion (US$44.4 billion)’, the report of Union Gaming Research explains.

The gaming analysts at Union Gaming Research believe that the VIP segment will continue to be affected by the anti-graft campaign of President Xi Jinping in Mainland China. However for them, December will mean further disruption for this segment due to the visit of Xi Jiping to Macau as part of the 15th anniversary of the handover.

Sands China tops market share In October, Sands China returned to the first position in terms of market share, overtaking Galaxy.

The company owned by Sheldon Adelson increased its market share from 21.8 percent in September to 23.7 percent in October, according to Business Daily calculations. As for the group founded by Lui Che Woo, after a historical first place in September, it dropped from first place to third in one month, as its market share decreased from 22.9 percent to 21.4 percent.

The group founded by Stanley Ho Hung Sun, SJM, climbed from third to second position increasing its share from 20.9 percent to 23.5 percent but failed to top the chart.

As for the other operators, Melco Crown occupies the fourth position (increased from 12.7 to 14.3 percent) followed by Wynn ( d ecr ea s ed fr o m 1 0 . 9 t o 8 . 9 percent) and MGM (decreased from 10.8 to 8.2 percent).

Rainbow Group presence in Parisian Macao, Studio City

T

he Rainbow Group, the Macaubased distributor of luxury fashion brands, plans to establish about ten additional outlets for its franchised products in 2015 and 2016, with two outlets slated to open in Parisian Macao and five in Studio City, company president and founder Terry Sio Un I told local Chinese-language newspaper Macao Daily News.

In an interview with Business Daily in July, Ms. Sio noted that her company would maintain a moderate expansion pace for its retail outlets in both mainland China and locally in the coming years.

Rainbow Group opened nine new stores in Macau last month and introduced three brands that the company has freshly secured the franchise for: Jimmy Choo, MCM and René Caovilla.

The company, whose portfolio features over 20 fashion brands, is currently running 158 mono and multi-brand shops in mainland China and Macau. While Rainbow Group now only operates 36 outlets in the city, Terry Sio said her company would be focusing on the local market following the opening of the new Cotai casino-resort projects in the coming years.

S.L.

6

November 5, 2014

Macau

Record wage inequality in Macau construction sector

Brought to you by

Since 2010, wages for local construction workers have increased 21.7 percent, while non-residents saw their salaries decrease by more than 6 percent. In the third quarter, for the same position, a resident worker received 54 percent more than a foreigner

HOSPITALITY

Luís Gonçalves

Packages Aplenty

luis.goncalves@macaubusinessdaily.com

Data just released for the number of visitors arriving on packaged tours in September confirms 2014 will be a bumper year. For the third month in a row, this category of visitor has exceeded the one million mark.

Last July was the first month ever to reach that level, with almost 1.16 million visitors arriving on packaged tours. The figure rose to 1.25 million in August - one of the peak months for all kinds of visitors, the other being December. Compared with the same months in 2013, those two results implied the startling growth rates of 35 percent and 29 percent, respectively. September normally sees a drop in the number of visitors; but with a figure slightly above the one million threshold, the result recorded still represents a growth of almost 9 percent compared to the same month in 2013.

The chart shows the evolution of the first nine months for each of the last five years. The summer peak is clearly visible in every year and so is the September drop. The patterns for the first half of the year are less regular and are somewhat affected by the atypical behaviour seen in 2010 and 2012. Note, in particular, the obvious and uncommon decrease in the values registered after May in 2010; and, to a lesser degree, in the second quarter 2012. In any case, the figure for the last quarter represents a homologous growth of 23.8 percent compared to 2013. Even before the last quarter, which includes the second peak of the year, is accounted for the current January to September cumulative figure for packaged tour visitors already amounts to 90 percent of the final figure recorded in 2013.

J.I.D.

23.8%

rise in number of visitors on packaged tours, Q3, on previous year

T

he difference between wages paid in the construction sector for locals and nonresidents continues to widen every month, reaching a record chasm in the third quarter of this year. As the demand for construction labour goes up with multiple investment projects in the pipeline here like the new casinos, light rail and bridge spanning Macau, Hong Kong and Zhuhai, construction companies are cutting down on foreigners’ salaries while increasing that of local ones.

According to official data released yesterday by the Statistics and Census Service (DSEC) the real wage index of local construction workers topped 121.7 points in the third quarter, a 6 percent increase on the previous quarter (114.9 points). The overall wage index (that includes locals and non-residents) marginally increased 0.6 percent in the last quarter to 94.1 points.

This difference in wage increase shows that the inequality between construction workers is expanding fast. For this index, the Statistics and Census Service uses 2010 as the base year. Which means that since that year local construction workers saw their salaries increase some 21.7 percent, while non-residents saw it decrease more than 6 percent. The statistics

office doesn’t reveal a specific index for foreign workers and this group is aggregated in the overall index, which went down by at least 6 percent.

This means that construction wages for non-residents went down much further than 6 percent.

As a consequence, the difference between local and non-resident wages in the construction sector reached a record in the third quarter, with both indices (local and overall) separated by 27.6 points. In the second quarter, the difference was ‘only’ 21.4 points.

Growing disparity The report also reveals that the salary inequality in the construction sector grows as we move up the ranks.

In the third quarter, a non-resident

construction worker received MOP573 per day, while a local employee in the same position got MOP883, some 54 percent more. For a specialised post like a structural iron erector, however, the disparity could reach a staggering 75 percent (locals get around a daily MOP1,192, while non-residents pick up MOP680).

In the period between July and the end of September, the average daily wage of construction workers increased 2.3 percent to MOP672 compared to the previous quarter, while the wage of local construction workers was MOP883, up 7.0 percent, three times more. Concrete formwork carpenters saw their salaries go up by 11.2 percent, the largest increase in the construction sector. On the other hand, carpenters received 11.3 percent less than in the second quarter, the statistics bureau said.

With regard to construction materials, the average price of concrete increased by 3.5 percent quarter-onquarter, at MOP686 per cubic metre in the third quarter of 2014; the average price of spiral and round reinforcing steel bars was MOP4,959 per tonne, down 1.9 percent. Meanwhile, the price index of construction materials for residential buildings (130.1) in the third quarter of 2014 increased quarterly by 0.9 percent.

Synertone:

Satellite broadband service for yachties

S

atellite operator Synertone Communication Corporation, which acquired satellite communication resources from Thaicom Plc covering both Hong Kong and Macau, has announced that the company wishes to first target its ‘4G mobile satellite telephone communication network system’ at Hong Kong’s yachtsmen.

‘Even though the yacht market [of Hong Kong] is not as big as the marine fishery communications market in mainland China, its customers consist of high net worth individuals,’ the Hong Kong-listed Synertone explained

in a statement released on Monday.

‘Up to now, there are more than 20,000 registered yachts [in Hong Kong], and the demand of the mobile satellite bandwidth will reach 2GBPS,’ the company noted.

“If the fee for each yacht is at least HK$2,500 (US$322.5) per month, the annual income in this satellite communication market of yachts will be over HK$600 million.’

In October last year, Synertone completed acquisition of satellite communication resources in China – including both Hong Kong and Macau - from a subsidiary of Thaicom

Plc called Ipstar Company Ltd. The acquired satellite resources, which Synertone named ‘Synertone 1’, include the bandwidth capacity and right to use the transmission for broadband Internet access.

Last month, Synertone said in a profit alert notice that its unaudited net profit for the six months ended September 30 was HK$101.6 million, a sharp increase of 212 percent from HK$32.6 million a year ago, thanks to the ‘smooth implementation’ of the operation of ‘Synertone 1’ broadband communication satellite.

S.L.

7

November 5, 2014

Macau

Pizza Express: Topping off its expansion with Macau The British restaurant chain is increasing its number of outlets in China, with Macau part of the expansion plan. At this stage, arch rival to Pizza Hut and Papa John’s Pizza is looking for a location for its first restaurant in the city João Santos Filipe

jsfilipe@macaubusinessdaily.com

R

estaurant chain Pizza Express is coming to Macau as part of its plan to expand the number of its outlets in China, the company revealed to Business Daily. The British corporation wants to open another 100 restaurants in China, and Macau is one of the locations that the company is eyeing.

“Yes, we’re interested in the Macau market for both local residents and also tourists”, the managing director of Pizza Express in Hong Kong, Justin Kennedy, told Business Daily. “We’re not aiming at ‘high-end’ customers.

We’re a mid-market restaurant frequented by guests from a wide socio-economic spectrum but united in their love of real pizza”, he said of the company’s strategy.

Pizza Express is now keen on reinforcing its position in the mainland China market, where it already has 10 restaurants located in Shanghai and Beijing. In addition, the British chain has 13 restaurants in Hong Kong.

“Macau is a logical market for our

expansion – we’ve just not yet found a suitable site”, Mr. Kennedy said, as at Pizza Express it is understood that the first impression is very important “to amaze the city”, thus no rushed

decisions will be taken.

“We’re constantly looking but have yet to identify a suitable site for our first location in Macau. We’re very methodical in our site selection and also

patient; we know that getting the right site is hard and it takes time – especially for our first branch, we’re keen to make a great first impression”, he said.

Last July, Pizza Express was bought out by Hony Capital for HK$11.25 billion as part of a strategy by the Chinese private equity group to bring well-established foreign brands to the country. In the Chinese market, Pizza Express will face fierce competition by US rivals Pizza Hut and Papa John’s Pizza.

In addition to running restaurants in the United Kingdom, Hong Kong and mainland China, Pizza Express trades in Europe, the Middle East and other parts of Asia. In the Middle East, the restaurant chain has 24 outlets in Kuwait, the United Arab Emirates, Oman, Qatar, Jordan and Bahrain.

In Europe, Pizza Express has an outlet in the British territory of Gibraltar and two in Cyprus.

Pizza Express is also represented in Indonesia with eight outlets, and India with four.

8

November 5, 2014

Greater China

China’s leaders final key to bourse link Delays in the programme have fuelled volatility in the city’s equities and sparked losses in shares of Hong Kong Exchanges & Clearing Ltd

T

he exchanges are ready. Regulators have signed off. And now Hong Kong’s leader says he hopes the program will start soon.

All that’s needed for the Hong Kong-Shanghai bourse link to begin is a green light from China’s top leadership, according to Zheshang Securities Co. and Dragon Life Insurance Co. Brokers and investors, who had anticipated making their first cross- border trades last month, have been left in the dark on the start date after six months of preparation.

Delays in the program, which gives foreigners unprecedented access to China’s US$4.2 trillion stock market and lets mainland investors buy Hong Kong shares, has fuelled volatility in the city’s equities and sparked losses in shares of Hong Kong Exchanges & Clearing Ltd. While Chinese Premier Li Keqiang hasn’t spoken publicly on the start date or reasons for the delay after unveiling the plan in April, some investors say China’s leadership may be waiting for clarity on tax rules and an end to pro-democracy protests in Hong Kong.

“The final say on when the exchange connect will start should be in the charge of the State Council, and top leaders still want to see how the event in Hong Kong is going,” said Wu Kan, a money manager at Shanghai-based Dragon

The final say on when the exchange connect will start should be in the charge of the State Council, and top leaders still want to see how the event in Hong Kong is going Wu Kan, money manager, Dragon Life

Hong Kong Stock Exchange trading lobby

Life, which oversees about US$3.3 billion.

APEC Meeting Hong Kong Chief Executive Leung Chun-ying told reporters yesterday he will discuss the start date and seek China’s support for the program during the Asia Pacific Economic Cooperation meeting scheduled this month in Beijing.

China is counting on the success of the bourse link, which allows a net 23.5 billion

yuan (US$3.8 billion) in daily cross-border purchases, to help liberalize its financial system and increase use of the yuan.

“The deciding power on when to start the link should be in the hands of levels that are higher than the CSRC, say, the State Council,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. The CSRC, or China Securities Regulatory Commission, is the nation’s financial markets regulator while the State Council is the

country’s cabinet.

Preparations for the link are in the final stage, the Shanghai Securities News reported on October 30, citing Yao Gang, vice chairman of the CSRC. Hong Kong’s securities regulator said a day earlier it had completed work for the program.

HKEx is at the “completion stage” of preparation for the link, Chief Executive Officer Charles Li said in a conference call with reporters on October 26, declining to speculate on a timeframe for

the start date.

The Shanghai bourse has finished preparation for the link, Reuters reported on October 29, citing Bo Que, an executive vice president at the bourse. A press official from the Shanghai exchange declined to comment.

“I feel that the ShanghaiHong Kong link will start in the near term,” Chen Li, a China equity strategist at UBS AG, said by phone on November 3. “It’s a matter of picking timing.”

Bloomberg News

Beijing meeting marks iron ore prices The raw material used for steel collapsed into a bear market this year Jasmine Ng

I

ron ore prices dropped to the lowest level since September amid a lack of demand in China, with some mills in the world’s largest buyer ordered to suspend production before a summit of world leaders in Beijing.

“Demand remains weak as Chinese buyers sit on the side-lines, with many Beijing steel mills forced to halt production leading up to the APEC meeting,” Australia & New Zealand Banking Group Ltd. said in a daily report yesterday. Prices dropped yesterday with a lack of bids, the bank said.

The raw material used for steel collapsed into a bear market this year as Rio Tinto Group, BHP Billiton Ltd. and Vale SA expanded supplies, spurring a global glut just as economic growth in China slowed.

Asia’s biggest economy will host the Asia Pacific Economic Cooperation forum in the capital from November 7-12, prompting authorities to order factory shutdowns to try to ensure clean air and blue skies for the event.

“Steel mills in Hebei have been

Rio Tinto mine

9

November 5, 2014

Greater China

APEC chessboard set

ICBC Doha new yuan clearing hub

China wants to see progress at the upcoming meeting in pushing forward its Free Trade Area of the Asia-Pacific

China’s central bank has decided to assign Industrial and Commercial Bank of China’s Doha branch as the yuan clearing bank for Qatar, two sources familiar with the matter told Reuters on Tuesday. “The central bank will soon announce the news,” one of the sources said. China’s central bank said on Monday it had signed a 35 billion yuan (US$5.7 billion) currency swap deal with its Qatari counterpart.

C

hina yesterday pressed its case for measures to create an alternative Asia-Pacific regional free trade area at an upcoming summit in Beijing, a framework that some see as an effort to attention away from a separate U.S.-backed trade deal.

China is promoting its Free Trade Area of the Asia-Pacific (FTAAP) plan ahead of this month’s Asia Pacific Economic Cooperation meeting, an idea supported in theory by the United States and other economies.

But critics have argued that Beijing is using the FTAAP to take oxygen away from talks on its TransPacific Partnership (TPP) plan, a comprehensive pact that currently excludes China and would tackle the kind of market restrictions still seen in China’s economy.

China wants to see progress at the upcoming meeting in pushing forward the FTAAP, which is supported by all 21 APEC members, Assistant Commerce Minister Wang Shouwen told reporters at a briefing.

“We hope we can adopt some concrete measures to make progress on the path to realising the (FTAAP) vision presented by leaders in 2006,” Wang said.

The Wall Street Journal reported on November 2 that the United States had blocked China’s efforts to use the APEC summit to push for the launch of a feasibility study on the FTAAP, a move typically seen as an opening move in negotiations.

Some experts view efforts to set up the 12-nation TPP as an economic framework as support for Washington’s “pivot” to Asia, but China has approached the idea with hesitancy, fearing it could be isolated from markets around the region.

asked to suspend production due to APEC, which affects iron ore demand temporarily,” said Yi Zhu, a Hong Kong-based metals and mining analyst at Bloomberg Intelligence.

“The mills will resume producing after the conference.”

Ore with 62 percent content delivered to Qingdao fell 1.2 percent to US$78.63 a dry metric ton yesterday, the lowest since September 30, according to Metal Bulletin Ltd. Prices dropped in the final two weeks of October, and a retreat to less than US$77.97, reached on September 29, would be the lowest since September 2009.

Preventing smog The measures in China are aimed at preventing smog from enveloping the city during the gathering, which is scheduled to be attended by U.S. President Barack Obama, Japanese Prime Minister Shinzo Abe and Russian President Vladimir Putin.

The provinces of Hebei, the country’s biggest steel-producing region that surrounds the capital, and Shandong, the third largest, will bear the brunt of the production losses.

Beijing was China’s 29th mostpolluted city in the six months through June, according to Greenpeace calculations based on government data. Seven out of the 10 mostpolluted cities in China are in Hebei, according to the provincial government.

Myanmar-China trade fair has date

Asia-Pacific leaders in a previous APEC meeting

The criticism from any side to the other one is not good for the negotiation Wang Shouwen, Assistant Commerce Minister

Robert Wang, U.S. Senior Official for APEC, told reporters in August that the United States did not see China’s proposed FTAAP as a rival, but little was known about what the Chinesesponsored free trade area would entail.

Some analysts are looking for a rebound in prices. Iron ore may climb to about US$90 a ton by the yearend on a seasonal build-up of mills’ holdings, UBS AG analyst Daniel Morgan said by e-mail yesterday.

After that, prices will again come under pressure in 2015 on further supply growth from the major miners, he said.

Inventories of iron ore held at ports in China shrank 0.7 percent to 106.3 million tons as of October 31,contracting for a fifth week, according to data from Shanghai Steelhome Information Technology Co. While that’s the lowest level since March, it’s still 23 percent higher this year,

HSBC’s View Prices will average US$80 this quarter, before climbing to an average of US$85 through 2015 as highercost supplies exit the market, Paul Bloxham, chief Australia economist at HSBC Holdings Plc, said by e-mail yesterday. Chinese output may slump 30 percent to 236 million tons next year, the bank predicts.

The global market needs to absorb a surplus of about 110 million tons next year, from 60 million tons in 2014, Goldman Sachs Group Inc. said in an October 23 report. The collapse in prices may deepen as global supply increases and steel-demand growth slows, according to Moody’s Investors Service.

“The bottom line is that we are discussing this concept. There are some different views about it. In general we endorse it,” Wang said, adding that it was too early to fix a target date for possible implementation.

China’s Wang Shouwen said China was maintaining a “positive stance” on the prospect of signing on to the Information Technology Agreement (ITA) at the WTO, which requires signatories to eliminate duties on some IT products.

The United States and Europe have blamed China, the world’s biggest exporter of IT products, for derailing talks on an update to a WTO pact on technology trade by asking for too many exemptions.

Washington has warned that China must move ahead with the ITA or risk upsetting other trade talks, namely a U.S.-China bilateral investment treaty currently in the works.

Reuters

The 14th annual Myanmar-China Border Trade Fair will be held in Myanmar’s north-eastern border town of Muse next month, according to the Department of International Trade Promotion of the Ministry of Commerce Tuesday. The border trade fair, slated for December 11 to 13, will showcase 224 booths -- 140 from China, 4 from neighbouring countries and 80 from Myanmar. The border trade fair is set to be held in Myanmar’s Muse and China’s Ruili alternately under an agreement on border region management and cooperation signed between the two countries in 1997.

Chinese win Mexico’s bullet train A Chinese-led consortium has won the bid to build Mexico’s first high-speed train project, local media reported. Mexico’s Ministry of Communications and Transport announced that the group, which includes the China Railway Construction Corporation (CRCC) and a handful of Mexican construction firms had been granted the contract. The 50.8-billion-pesos (about US$3.7 billion) project involves building a bullet train line to connect the national capital of Mexico City with the growing industrial hub of Queretaro to the north by 2017. Upon completion, the bullet train service would cut travel time from about two and a half hours.

Tianjin foreign investment growth steady

0.7 percent contraction of inventories of iron ore at Chinese ports end October

Iron ore shipped to China from Australia’s Port Hedland climbed to 31.7 million tons last month from 29.8 million in September and 25.2 million a year earlier, data showed yesterday. The port handles output from BHP, Fortescue Metals Group Ltd., Australia’s third-largest producer, and Atlas Iron Ltd. Total shipments last month were a record 37.5 million tons.

China’s manufacturing slowed further in October as a property slump and slowdown in investment growth put the world’s second-largest economy on course for the slowest full-year growth since 1990. The economy expanded 7.3 percent onyear in the third quarter, the weakest pace in more than five years.

Bloomberg News

Actual foreign investment in north China’s port city of Tianjin grew 12 percent in the first nine months to US$14.2 billion. Contracted foreign investment increased by 10.9 percent year on year in the first three quarters to hit 17.3 billion dollars, data from the Tianjin Commerce Commission showed Monday. Foreign direct investment (FDI) in the city’s manufacturing and service industries saw steady growth. Actual foreign investment in the manufacturing sector reached US$6.3 billions in this period, up 24.5 percent year on year.

Textile conference eyes industry innovation The 89th Textile Institute Conference opened Monday in Hubei Province, with experts expected to exchange ideas to drive innovation in the industry. The event will bring together over 260 representatives from more than 20 countries and regions to discuss smart textile products, wearable technology and the future of the textile industry.

Textile is one of China’s pillar industries, with the country consuming the largest portion of textile products in the world. Moreover, China is the world’s biggest textile producer and exporter, making innovation extremely important, said Sun Ruizhe, deputy head of China National Textile and Apparel Council.

10

November 5, 2014

Greater China

Xiaomi seeking funding Xiaomi has been winning users by selling inexpensive phones with hardware and specifications comparable with more expensive devices

X

iaomi Corp. is in talks for a funding round that values the smartphone maker at about US$40 billion to US$50 billion, people familiar with the matter said.

The discussions are at an early stage and nothing is finalized, said the people, who asked not to be identified because the matter is private.

The world’s third-biggest smartphone maker had a financing round in August 2013 that valued the company at US$10 billion.

Founder and Chief Executive Officer Lei Jun has pushed Xiaomi, which sells direct to consumers and only released its first smartphone in 2011, into new markets from Singapore to India.

The international expansion, combined with surging sales of its Mi 4 smartphone and low-cost Redmi model, have vaulted the company into the ranks of the world’s top vendors.

“They have a cost advantage over many of the larger vendors because of their online sales model,” said James Roy, a Shanghai-based analyst at China Market Research Group.

The valuation surpasses more established Asian electronics makers including Sony Corp., which has a market capitalization of about US$21 billion, and Lenovo Group Ltd.’s US$16 billion. Lenovo, the world’s largest PC maker, just acquired Google Inc.’s Motorola Mobility phone unit.

Smartphone competition DST, an existing investor, is among the potential participants in the funding round, said one of the people.

Xiaomi’s valuation would also exceed recent funding rounds that pegged U.S.

the third-largest vendor, according to IDC. Xiaomi sells its flagship Mi 4 starting from 1,999 yuan (US$327) on its China website, or just more than one-third of the starting price for Apple’s iPhone 6 in China.

The company has also begun branching from phones into other consumer electronics. In May, the company unveiled its first tablet computer, the Mi Pad. The company earlier released the MiBox, a TV set-top box, and televisions that connect to the Web, running the Android operating system.

It’s been a really dramatic rise for Xiaomi in the past four years from nothing James Roy, analyst, China Market Research Group

Hugo Barra, ex-Google and current Vice President of the Chinese company, brandishes a Xiaomi device

start-ups Uber Technologies Inc. at US$17 billion and Snapchat Inc. at US$10 billion. Forbes reported on October 31 that Xiaomi was seeking a valuation of more than US$40 billion.

A representative for DST, run by Russian investor Yuri Milner, couldn’t be reached for comment.

In an interview in September

2013, CEO Lei said Xiaomi wouldn’t sell shares to the public in the next five years.

Xiaomi more than tripled global smartphone shipments to 17.3 million units in the third quarter from 5.6 million a year earlier, IDC reported October 29. Its market share more than doubled to 5.3 percent from 2.1 percent, the researcher said.

That lifted Xiaomi into the world’s top three vendors for the first time, trailing only Suwon, South Korea-based Samsung Electronics Co. and Apple Inc. in Cupertino, California, IDC reported.

Cross-town competitor Lenovo subsequently completed its purchase of Motorola in a combination that would have made it

Xiaomi, which keeps costs down by selling directly to consumers online, was backed in its earlier funding rounds by investors including Singapore’s Temasek Holdings Pte, Qiming Venture Partners, Qualcomm Ventures, IDG Capital and Morningside Venture Capital.

Lei has set a goal of boosting sales fivefold to 100 million phones next year.

Xiaomi shipped 18.7 million units in 2013.

Bloomberg News

Farm smuggling crackdown uncovers massive lost tax The crackdown on smuggling of cheaper farm produce started in March

C

hina’s crackdown on agricultural smuggling has uncovered 487 cases with a tax evasion value of 7.1 billion yuan (US$1.16 billion), a rise of 71 percent in the past year, said the central government in a report on its website.

The crackdown on smuggling of cheaper farm produce started in March and comes after Beijing raised domestic agricultural prices to protect its rural population.

Beijing’s grain purchases and corn stockpile scheme, under which it buys from farmers at inflated prices, can be as much as 40 percent higher than global prices, and has resulted in a rise in the smuggling of grains, meat and cotton.

In the first nine months of the year, authorities seized 2.93 million tonnes of smuggled corn and rice, 112,000 tonnes of frozen meat and 106,000 tonnes of cotton in ports such as Nanning and Kunming which border Vietnam, said the report.

“We will continue to strengthen the crackdown on smuggling of rice and other farm products, particularly at some key border areas and markets...,” customs spokesman Zhang Guangzhi was cited as saying in the report.

Last month, China’s Vice Premier Wang Yang said Beijing would strengthen controls over grains imports and crackdown on smuggling in a bid to cut oversupply, with record stockpiles

creating storage problems for the new harvest.

China’s stockpiling policy, with its inflated domestic prices, has made cheaper overseas supplies more attractive for end-users like feed mills, forcing the government to take action to try to curb surging imports.

China does not reveal details of its total grain stockpiles, but analysts estimate the country was sitting on close to 100 million tonnes of corn stocks - equivalent to about half annual domestic consumption - before the current harvest began.

Reuters

11

November 5, 2014

Asia

Australia’s central bank keeps rates low Figures from the Australian Bureau of Statistics out yesterday showed retail sales expanded at the fastest pace in 19 months Wayne Cole

A

ustralia’s central bank kept interest rates at record lows for a 14th straight policy meeting yesterday, saying the stimulus was justified given the outlook for sub par growth even as consumers showed signs of opening their wallets.

The result surprised no one but the local dollar did edge higher as the Reserve Bank of Australia (RBA) refrained from escalating its verbal campaign for a lower currency.

“Overall, the Bank still expects growth to be a little below trend for the next several quarters,” said RBA Governor Glenn Stevens, in what was a carbon copy of recent statements.

“On present indications, the most prudent course is likely to be a period of stability in interest rates.”

Interbank futures had priced in no chance of a move this week, while a Reuters poll of 24 analysts had found all expected rates to stay on hold. All also suspect the next move will be up but not until far into 2015.

While low rates have supported home building and consumer wealth, the jury is still out on whether they alone will be enough to offset the drag from falling investment in the mining sector as a decade-long boom winds down.

There are some hopeful signs. Figures from the Australian Bureau of Statistics out yesterday showed retail sales expanded at the fastest pace in 19 months in September as consumers went on a buying frenzy for Apple’s new phones.

Spending jumped 1.2 percent, far outstripping forecasts of a 0.4 percent rise. Adjusted for inflation, sales climbed 1 percent for the whole third quarter, suggesting household consumption made a useful contribution to economic growth.

“It certainly gets us off to a good start,” said Michel Blythe, chief

KEY POINTS RBA holds rates at 2.5 pct, as it has since August 2013 Says policy to stay loose given outlook for sub par growth Retail spending tops expectations as Aussies snap up iPhones Revisions show employment softer in recent months economist at Commonwealth Bank.

“It does suggest whatever postbudget pullback we might have seen on the consumer side is over and demonstrates the ability of new items like the iPhone6 to kick things along.”

Less helpful was a widening in the country’s trade deficit to A$2.26 billion in September as falling prices for key commodities restrained export earnings even as volumes improved.

The steep decline in prices for commodities, notably iron ore, is a major reason the RBA has been agitating for a greater drop in the local currency.

In his statement yesterday, Stevens said the currency was still above most estimates of its fundamental value, but stopped short of calling for a further drop.

The labour market was also looking a little less healthy after revisions by the Australian statistician.

Following problems with its jobs survey, the ABS chose to adopt an entirely new method of seasonal ad-

Reserve Bank of Australia headquarters

justment and to restate the figures back to December last year.

The new series estimated 23,700 jobs had been lost in September, compared to the initial estimate of a fall of 29,700. However, August was restated to show a drop of 9,000, compared to a previously stated rise of 32,100.

The unemployment rate was now a tenth higher at 6.2 percent in September and 6.1 percent for August.

“The strength in retail hints at some spill over from the housing market, but the weakness of the labour market continues to work in the opposite direction, weighing on confidence and wage growth,” said Michael Turner, a strategist at RBC Capital Markets.

“There is little reason to think that the 2.50 percent cash rate will not persist until well into 2015.”

Reuters

South Korea October inflation picks up The Bank of Korea has a three-year 2.5 to 3.5 inflation target band but annual inflation has stayed in the 1-percent range since January 2013

S

outh Korea’s annual inflation in October picked up for the first time in three months but was still well clear of the lower threshold of the central bank’s medium term target, leaving sufficient headroom to cut rates further if required.

The consumer price index rose 1.2 percent in October from a year earlier, Statistics Korea data showed yesterday, gaining at a slower pace compared to a 1.4 percent rise tipped in a Reuters survey of 13 analysts.

It was slightly ahead of the 1.1 percent annual rise seen in September.

On monthly terms, the index dropped 0.3 percent in October, compared to the median pick for a 0.1 percent fall and marked the biggest decline since October last year.

0.3 percent monthly base inflation decrease

The government headed by Park Geun-Hye (pictured) has launched a package of stimulus policies and eased regulations since Finance Minister Choi Kyung-hwan took office in July

The index was down 0.1 percent in September.

Annual core inflation, which strips out volatile agriculture and oil products prices, rose 1.8 in October from 1.9 percent in September.

It was the slowest annual increase since February.

The Bank of Korea has a three-year 2.5 to 3.5 inflation target band but annual inflation has stayed in the 1-percent range since January 2013, prompting criticism from opposition politicians that the target is unrealistic and needs to be revised lower.

However, the bank has said that any changes will occur at the end of the threeyear review period in 2015, and forecasts inflation to rise to the 2-percent range next year as current low price pressures stem from supplyside factors and not demand.

The central bank has cut interest rates twice this year in a bid to prop up growth and complement government efforts to support the economy.

Reuters

12

November 5, 2014

Asia Vietnam may post trade deficit Vietnam may post a trade deficit next year after three straight years of surpluses due to weaker growth in exports and higher imports of machinery, the Ministry of Industry and Trade was quoted by local media as saying at a monthly meeting.

The country’s trade deficit is expected to be five percent of total exports in 2015, the ministry-run Industry and Commerce newspaper said, citing the ministry’s proposal to the National Assembly.

SoftBank cuts FY profit target SoftBank Corp, the Japanese mobile carrier with ambitious plans to grow overseas, slashed its full-year profit forecast on bleak prospects for its U.S. Sprint Corp business as it reported a 23 percent drop in second-quarter operating profit. In a statement yesterday, SoftBank said it now expects an operating profit of 900 billion yen (US$7.9 billion) in the 12 months through March 2015, 10 percent down from the 1 trillion yen it previously forecast. SoftBank bought the number the three U.S. mobile carrier for US$21.6 billion last year.

S.Korea concerned about yen South Korea’s finance minister said yesterday the government is concerned about the effects of a weakening yen and will continue market stabilising efforts after the Japanese central bank decided to expand its massive stimulus last week.

Speaking in parliament, Finance Minister Choi Kyung-hwan told policymakers the government is considering measures according to a number of scenarios to respond to the weakening yen.

Australian unemployment revised up Australia’s official statistician yesterday released revised figures for employment that showed the labour market was weaker than first reported over August and September. Following problems with its jobs survey, the Australian Bureau of Statistics (ABS) has chosen to adopt an entirely new method of seasonal adjustment and to restate figures on employment and the jobless rate back to December last year. The new figures estimated 23,700 jobs had been lost in September, compared to the initial estimate of a fall of 29,700.

U.S. probes Honda over airbag The U.S. National Highway Traffic Safety Administration said on Monday it had opened an investigation into whether Honda Motor Co Ltd failed to report to the auto regulator deaths or injuries involving Takata Corp air bags. U.S. law requires that automakers submit to NHTSA on a quarterly basis reports on every incident involving death or injury they have received involving their vehicles.

Indonesian Q3 growth seen at President Joko Widodo faces a challenge turning round Southeast Gayatri Suroyo

I

ndonesia’s economy is likely to have stayed in a rut in the third quarter with growth at its slowest for five years as exports suffered from weak global demand, and domestic consumption sagged after an election campaign spending splurge.

Elected in July and sworn in late last month, President Joko Widodo faces a challenge turning round Southeast Asia’s largest economy, while also having to rein in an overblown fiscal deficit bequeathed by the previous administration.

Gross domestic product data set to be released today will give Widodo’s cabinet its most comprehensive picture of an economy that suffered a drop in investment as businessmen put off decisions due to political uncertainty before the election.

Widodo’s victory has failed to dispel many doubts as his coalition lacks a majority in parliament, raising question marks over its ability to deliver needed reforms.

“The uneasy political situation even after the conclusion of legislative and presidential elections looks to have affected business investment decisions in the quarter, and hence, probably still presented a significant drag on the

The new Indonesian government faces challenging times

overall growth,” said Wellian Wiranto, an economist with OCBC in Singapore.

The median forecast in a Reuters poll of 14 analysts showed GDP likely expanded 5.10 percent in JulySeptember from the same period a year earlier, and compared with the second quarter’s 5.12 percent annual growth.

Widodo’s new Finance Minister Bambang Brodjonegoro has forecast GDP growth of 5.0-5.1 percent in the third quarter, much slower than

the annual target set by the previous government of 5.5 percent.

Brodjonegoro expects growth to improve next year as investment recovers, but the economy is still far from reaching Widodo’s target of 7 percent growth.

Exports and investment have stalled this year, but overall growth has remained above 5 percent thanks to domestic consumption, but this probably ebbed in the third quarter

Shake-up for Japan’s rural lenders Their core lending business remains weak, raising questions about their long-term health

J

apan’s second-largest regional lender Bank of Yokohama Ltd yesterday said it is considering a merger with a smaller rival, a move that could spur much-needed consolidation in an industry facing bleak prospects for growth.

The proposed deal would create the largest Japanese regional bank and could herald a new stage in an industry shake-up considered long overdue by authorities and industry insiders alike.

In separate statements, Bank of Yokohama, with 13.8 trillion yen (US$121.2 billion) in assets, and Tokyo-based Higashi-Nippon Bank Ltd, with 1.96 trillion yen in assets, said they were considering a merger but nothing had been decided.

Any such deal would create the biggest regional lender in Japan, topping current leader Fukuoka Financial Group Inc. “In terms of scale per se, it may not be so big a deal,” Standard&Poor’s Ratings Japan analyst Ryoji Yoshizawa said. “However, it could upset the balance of the current competitive

landscape, in which banks have separate territories.”

Japan’s roughly 100 regional banks extend about half of Japan’s US$4 trillion worth of outstanding bank loans. But they have limited geographic reach, with many focusing on only one prefecture.

Japan is the fastest-greying industrial power and rural populations are ebbing even faster, as young people head for the cities. To avoid collapse, regulators are encouraging the ultra-conservative small banks to embrace change.

“As I have been saying, regional banks face various degrees of issues such as the shrinking population,” Finance Minister Taro Aso told reporters after a cabinet meeting yesterday.

Twenty-three Japanese banks melded into today’s four major banking groups over a tumultuous 15 years ending in 2005, a period marked

by Japan’s post-bubble economic and financial crisis. Regional banks, however, have largely been spared the knife.

KEY POINTS Tie-up would create Japan’s biggest regional lender Regulators have been urging consolidation Aging population, urbanisation hitting rural banks

Industry officials attribute the slow pace of realignment to regional lenders’ relatively stable earnings, which give executives a false sense of safety.

More than a dozen regional banks last week said their first-half results likely beat forecasts, as smaller bad loan costs buoyed profits.

Reuters

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luciana Leitão, Luis Gonçalves, Michael Armstrong, Sara Farr, Stephanie Lai, Óscar Guijarro, Kam Leong GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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November 5, 2014

Asia Hyundai, Kia in record settlement

slowest in 5 years Asia’s largest economy

The penalties were the largest ever under the Clean Air Act

Private consumption was previously strong due to election, but we saw an adjustment in private consumption after electricity tariff was raised Aldian Taloputra, analyst, Mandiri Sekuritas as election-related spending eased, according to Aldian Taloputra, an economist with Mandiri Sekuritas in Jakarta.

A weaker rupiah currency will also have reduced demand for imported goods, which while good for reducing an onerous trade deficit, still put a dampener on consumption, he added.

Net exports probably contributed little to growth. The slowdown in China, the biggest customer for Indonesia’s

exports of commodities and mineral resources, has been a drag.

On a customs basis, merchandise exports contracted 0.93 percent in in the first nine months of this year, while imports were down 4.26 percent during the same period.

Reuters

K

orean carmakers Hyundai Motor Co and affiliate Kia Motors Corp will pay US$350 million in penalties to the U.S. government for overstating fuel economy ratings in what officials said was the biggest settlement of its kind.

The deal comes on top of US$395 million the automakers agreed to pay last December to resolve claims from the owners of the vehicles, bringing the companies’ total cost for the mileage overstatements to more than US$700 million.

Monday’s settlement with the U.S. Environmental Protection Agency, the U.S. Department of Justice and the California Air Resources Board resolves an investigation of the South Korean carmakers’ 2012 fuel economy ratings.

Under the accord, which involved the sale of 1.2 million cars and SUVs, the South Korean car firms will pay a US$100 million penalty, spend around US$50 million to prevent future violations and forfeit emissions credits estimated to be worth more than US$200 million.

The greenhouse gas emissions that the forfeited credits would have allowed are equal to the emissions from powering more than 433,000 homes for a year, the EPA said.

EPA Administrator Gina McCarthy said Hyundai and Kia had committed the most egregious violation of the reporting standards. She declined to say whether other violators may also be fined.

In November 2012, Hyundai and Kia conceded they overstated fuel economy by at least a mile per gallon on vehicles after the EPA found errors for 13 Hyundai and Kia models from the 2011 to 2013 model years.

Hyundai said at the time that the affected cars’ reported fuel economy would be adjusted by 1 to 2 miles per gallon.

Hyundai and Kia both increased their shares of the U.S. new-vehicle market in the past decade, particularly during the economic downturn of 2008 to 2010 when consumers craved fuel-efficient and relatively low-priced vehicles.

Reuters

Thai central bank seen holding key rate The central bank has forecast GDP growth of 4.8 percent for next year, compared with the Finance Ministry’s 4.1 percent Orathai Sriring

T

hailand’s central bank is expected to leave its main interest rate steady for a fifth straight meeting today, and possibly well into next year, to help the sputtering economy recover from months of political unrest.

All 19 economists polled

by Reuters expect the Bank of Thailand’s monetary policy committee (MPC) to leave the policy rate steady at 2 percent on Wednesday and at its meeting in December, the last review of the year.

And most economists expect the next move to be a rate increase, from mid-2015.

The central bank’s one-day repurchase rate has been at 2 percent since March, when it was cut by 25 basis points to help businesses cope with the turmoil.

The BOT has forecast economic growth of 1.5 percent this year, recovering from a first-half contraction. But that would still be the worst growth since 2011, when devastating flooding slashed growth to 0.1 percent.

With inflation hovering at a one-year low of 1.48 percent in October, the BOT has leeway to hold the policy rate down to aid the fragile economy while household debt levels are high.

KEY POINTS All 19 economists in poll see key rate held steady at 2 pct Policy rate seen steady for 5th straight meeting Economy in spotty recovery as exports are weak, inflation tame Rate decision due on Wed, Nov. 5, at 0730 GMT Four new, non-central bankers will preside over the meeting on Wednesday - Veerathai Santiprabhob, member of the State Enterprise Policy Commission; Porametee Vimolsiri, deputy secretarygeneral of the National Economic and Social Development Board; Jamlong Atikul, former president of Bank of Ayudhya; and Sethaput Suthiwart-Narueput, former chief economist of Siam Commercial Bank.

“The presence of new members is likely to result in a fresh train of thought within the committee,” HSBC said in a report. The MPC comprises

the central bank governor and two deputies, plus four outside experts who rotate every three years.

Economy seen improving At the last review in September, the MPC unanimously voted to hold the rate, saying the current policy rate was appropriate for the economic recovery and long-term financial stability.

While expecting no policy change, Barclays economist Rahul Bajoria noted the risk of another rate cut had risen, given the decline in fuel prices and the slow

economic recovery.

The economy avoided a technical recession in AprilJune but still shrank 0.1 percent in the first half due to the political unrest and poor exports. Recent data shows the recovery has not been broad based, with annual exports unexpectedly rising in September but factory output and car sales still falling.

Soft global demand and lower commodity prices have hurt Thai shipments, while private consumption, which makes up half of the economy, remains weak as households are heavily indebted.

Economists and the military

government expect stronger growth next year, largely due to pump-priming initiatives.

The central bank has forecast GDP growth of 4.8 percent for next year, compared with the Finance Ministry’s 4.1 percent.

On Monday, Deputy Prime Minister Pridiyathorn Devakula reiterated that the economy could grow 4 or even 5 percent in 2015. “Next year, it’s easy to get 4 percent growth as the government starts investment projects and recent stimulus measures will start to bear fruit in December,” he said.

Reuters

14

November 5, 2014

International Russia spreads slowdown Economic growth in the Caucasus and Central Asia (CCA) is set to weaken this year and next, hit by a slowdown in Russia, the region’s key trading partner and source of remittances and investment, the International Monetary Fund said yesterday. The region, which includes eight ex-Soviet states sprawling from the Black and Caspian seas to Siberia, Iran and China, will see its economic growth slow to about 5.5 percent in 2014-15, 0.75 percent lower than projected in the Fund’s outlook in May.

Obama, Yellen discuss Wall St. reforms President Barack Obama and Federal Reserve Chair Janet Yellen discussed the outlook for the U.S. and global economies and the implementation of Wall Street reforms during an Oval Office meeting on Monday, the White House said. It was the first one-on-one meeting between Obama and Yellen since she took the helm of the central bank, which sets the nation’s monetary policy but operates independently from the White House. The Federal Reserve and other financial regulators are still finalizing rules from the 2010 Dodd-Frank Wall Street reform act, which aimed to strengthen the financial system.

French car sales lose momentum French car sales fell back in October as consumers put off big purchases amid weakening economic confidence, the country’s CCFA industry association said. Registrations fell 3.8 percent to 160,162 cars last month, the CCFA said -- the first year-on-year decline since February after adjusting for the number of selling days each month. France, the euro zone’s second-biggest car market, has lagged behind an already fragile recovery from a brutal six-year demand slump in the region. French car sales for January-October are up just 1.4 percent.

European companies defy forecasts The European reporting season is not turning into the rout investors feared as many of the largest companies managed to navigate weak demand through cost cuts and innovation to deliver earnings in line with or ahead of downbeat forecasts. Of the fifth of companies in the European Stoxx 600 index that have reported so far, 60 percent have beaten earnings per share (EPS) expectations, according to Thomson Reuters research, compared with just 48 percent beat in a typical quarter. Cyclical stocks have delivered better results than forecast.

Argentina to wait until 2015 Chances of a deal to end Argentina’s feud with holdout bond investors will improve in January when current restructuring rules expire, the economy minister said in comments published on Monday, raising some hopes for the country’s stagnant economy. The government is in a legal tussle with holders of defaulted debt who spurned two debt swaps and sued for full repayment. The dispute, along with heavy trade controls and high inflation, has hammered business confidence in Latin America’s No. 3 economy as it staggers toward recession.

October world factory activity slowly expands Euro zone manufacturing activity expanded at a slightly faster pace

G

lobal manufacturing activity increased last month at the same modest pace as in September, suggesting the need for continued economic policy stimulus, especially in Europe.

JPMorgan’s Global Manufacturing Purchasing Managers’ Index, produced with Markit, held steady at 52.2 in October. But it was one of the lowest readings this year, suggesting factory activity is expanding slowly.

The index combines survey data from countries including the United States, Japan, Germany, France, Britain, China and Russia.

Europe in the doldrums Euro zone manufacturing activity expanded at a slightly faster pace in October, but only tepid expansion in Germany and contractions in France and Italy will be disconcerting for the European Central Bank as it battles to prevent deflation.

Some form of quantitative easing, or buying of government or corporate bonds, is one of the last policy options the ECB has left to fight deflation risks and rekindle economic growth in the monetary union.

Markit’s final October manufacturing PMI for the euro zone was 50.6, beating September’s 50.3 but shy of an earlier flash estimate of 50.7.

“The performance of euro zone manufacturing remained broadly flat at the start of the final quarter,” said Rob Dobson, senior economist at Markit. “Manufacturing is therefore unlikely to provide any meaningful boost to the currency union’s anaemic GDP growth.”

Germany’s manufacturing industry returned to modest growth last month but new business fell slightly for a second month as Russian sanctions and a general economic slowdown weighed on demand.

Adding to the gloom, the surveys showed French factory activity contracted more quickly than in September, while Italian manufacturing slowed at the sharpest rate in 17 months.

Outside the euro zone, British factories reported activity expanded at the fastest rate in three months in October. But weak demand from the euro zone, its main trading partner, sent export orders tumbling at the fastest pace since January 2013.

Americas Across the Atlantic, the manufacturing picture was also mixed in October, with U.S. factory activity slowing in the Markit PMI survey but expanding at its fastest growth rate in three and a half years, according to the Institute for Supply Management.

Private data vendor Markit said its final U.S. October PMI fell to 55.9 from 57.5 in September.

The global PMI continues to signal 3-4 percent annualized gains in manufacturing output as we head toward year-end David Hensley, JPMorgan director

“The latest figures indicate that the recovery has lost some intensity at the start of the fourth quarter, reflecting subdued export demand from the euro area and key emerging markets,” said Tim Moore, senior economist at Markit.

However, ISM said its index of U.S. factory activity rose to 59 in October from 56.6 in September, bringing the index back to the same level it recorded in August, which was the highest since March 2011.

“The overall growth outlook remains very resilient as the underlying strength in domestic demand clearly outweighs potential external headwinds,” said Harm Bandholz, chief U.S. economist at UniCredit Research.

Manufacturing sectors in Canada and Mexico, whose economies are linked to the U.S. market, both did well in October.

The RBC/Markit Canadian PMI rose to a seasonally adjusted 55.3 last month from 53.5 in September, the highest reading since November 2013.

“We saw a strong uptick in Canada’s manufacturing business conditions in October driven by new order growth,” said Craig Wright, senior vice-president and chief economist at RBC. Mexico’s HSBC/Markit PMI rose to 53.3 in October, after adjusting for seasonal variation, from 52.6 in September, a nine-month high.

Mexico exports mostly manufactured goods and sends nearly 80 percent of its exports to the United States. Analysts expect the economy to expand by about 2.5 percent this year, with growth picking up after a weak start to the year.

However, activity in Brazil’s manufacturing sector declined for a second straight month in October.

The HSBC/Markit Purchasing Managers’ Index for Brazil’s manufacturing sector dropped to 49.1 in October from 49.3 in September in seasonally adjusted terms. It was the sixth decline in the past seven months.

Brazilian manufacturers have struggled for years with high interest rates, scarce labour and burdensome taxes. Ahead of the re-election of President Dilma Rousseff in October, the country endured a mild economic recession in the first half of the year.

Regional manufacturing surveys from Asia were littered with unwelcome landmarks, including a five-month low for activity in China, a four-month trough for South Korea and a 14-month low for Indonesia.

Reuters

15

November 5, 2014

Opinion Business

Celebrity central bankers

Leading reports from Asia’s best business newspapers

Kenneth Rogoff

wires

THE PHNOM PENH POST

Former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University

Cambodia’s agriculture sector is set to receive a funding boost, according to the government’s 2015 draft budget statements, but the anticipated increase has not impressed industry experts. The draft budget documents show the Ministry of Agriculture, Forestry and Fisheries (MoAFF) will receive US$126 million for 2015, up 29 per cent from US$97.8 million this year.

More than US$81 million, raised through domestic revenues such as taxation, will be allocated to MoAFF departmental administration costs and infrastructure investments, according to the statements.

VIETNAM NEWS Vietnam registered positive growth of exports to the US in the first 10 months, with the country’s exports to the United States reaching US$23.69 billion, a 21.8 per cent year-on-year increase, the Ministry of Industry and Trade reported. At a press conference held in the cap­ ital city, the ministry said in October alone Vietnam’s export turnover to the US rose by 17.4 per cent over the previous month, reaching US$2.84 billion. Meanwhile, garments and textiles, shoes, computers and accessories, and wood products saw growth rates of more than 10 per cent over the same period last year.

THE AGE France’s Danone, battling local rivals for a larger share of China’s booming baby milk market, has invested US$550 million in formula maker Yashili International Holdings, further reducing its dependence on slow growth Europe. The deal strengthens Danone’s ties with China’s top dairy firm -- Yashili’s largest investor and comes as the French firm’s key Dumex baby nutrition brand seeks to win back consumers... The 25 percent stake purchase is also the first major investment since Danone split its chairman’s dual roles in September, handing the CEO job to Emmanuel Faber.

THE STRAITS TIMES The boards of listed companies in Singapore could improve their gender diversity and their disclosure of how much directors are paid, two industry bodies said yesterday. A study by the Singapore Institute of Directors (SID) and the Institute of Singapore Chartered Accountants (ISCA), presented at the Carlton Hotel, found that men occupy more than 90 per cent of all board seats and 56 per cent of company boards have no women at all. Also, only 31 per cent of firms disclose the precise remuneration of their directors though the code of corporate governance now demands it.

W

hy do the comments of major economies’ central bankers command outsize attention nowadays? It is not as if they change interest rates all of the time. Nor have they developed new, more robust models for analysing the economy. On the contrary, major central banks’ growth and inflation forecasts in the years since the financial crisis have consistently overestimated both growth and inflation – and by wide margins.

There are many good reasons for the attention lavished on monetary policymakers, including the rise of central-bank independence, public acceptance of the need to appoint highly competent technocrats to oversee the money supply, and the deepening of financial markets.

And many central bankers have been rightly lauded for their role in preventing a global meltdown during the financial crisis.

Even so, given the numerous uncertainties surrounding macroeconomic forecasts and the effects of policy instruments (not least quantitative easing), many academics find it puzzling that central bankers’ speeches and statements generate so much fanfare. And for all of their heroics during the financial crisis, many central bankers have been far too inflexible in the aftermath, worrying too much about overshooting inflation targets, and too little about deflationary dynamics.

Moreover, central bankers bear a share of the blame for the crisis in the first place, mainly owing to lax regulatory policy.

Many central bankers portray former US Federal Reserve Chairman Alan Greenspan (who served from August 1987 until January 2006) as the culprit, saying that he projected an image of central-bank omnipotence that is not warranted in

In short, there are many good reasons why central bankers receive so much media focus, including their relative independence and generally solid performance. But there are also other reasons having to do with politicians’ need for scapegoats…

theory or practice. But this critique is overblown: Greenspan is long gone, but the focus on central-bank pronouncements is greater than ever.

What, then, is going on? I would argue that, in addition to all of the factors listed above, three further considerations should be noted. For starters, the public perception that central bankers are omniscient makes them an

attractive whipping boy for politicians. Moreover, the digital revolution in media has elevated the role of business news, one of the few profit centres for print and broadcast journalism in many countries. Central bankers’ pronouncements are of interest to businesspeople – especially in the financial sector – and businesspeople are of interest to advertisers.

Finally, and perhaps least appreciated, is the fact that central-bank policy pronouncements are almost unique in having clear and predictable effects on financial markets, at least in the very short run (which can be a day or less). If Fed officials surprise markets by making more “hawkish” statements (suggesting an upward bias to policy interest rates) than investors were expecting, the dollar will usually appreciate; long-term dollar interest rates will usually rise; and the stock market typically will decline.

True, these effects may be small and transitory. But, unlike most of the reams of macroeconomic information with which we are bombarded every day, central bankers’ speeches and opinions have relatively foreseeable effects, especially when the bank’s chair, president, or governor speaks, or other officials speak in concert. And, with trillions of dollars swirling around global financial markets, this predictability creates a fat target, with investors willing to make massive bets when they are pretty sure they are right, even if the profit per dollar is small.

If you think I am exaggerating, consider the coverage of other economic news, say, unemployment, GDP, or the trade balance. Virtually every story quickly shifts its focus to what the data mean for monetary policy.

Some economic indicators, such as unemployment or inflation data, are indeed immediately important for central banks, because they may directly concern their mandates, and therefore have rather predictable effects. But much information is simply noise.

This makes policy opinions that come straight from the horse’s mouth almost uniquely valuable.

In short, there are many good reasons why central bankers receive so much media focus, including their relative independence and generally solid performance. But there are also other reasons having to do with politicians’ need for scapegoats, the media’s struggle to reinvent itself in the Internet age, and central-bank pronouncements’ predictable short-term effects on financial markets. These other factors have combined to create a bubble around central-bank pronouncements and decisions that grossly exaggerates their economic significance.

Is this a bubble that central bankers should worry about?

The answer is clearly yes. The news bubble is of particular concern, because it reinforces the idea that central bankers somehow care disproportionately about financial markets, which is generally not the case.

Most central bankers really are targeting growth, inflation, and financial stability, if not necessarily in that order. The political bubble is an inevitable product of central-bank independence, and preventing monetary policy from becoming a target for elected officials requires constant effort. The predictability bubble is perhaps the trickiest to navigate, though my instinct is that less would be more. Exaggerated importance is one kind of bubble that central bankers should always be eager to burst.

Project Syndicate

16

November 5, 2014

Closing Nissan trims forecast amid China sales decrease

Beijing ‘confident’ in 2022 Olympic Winter Games bid

Nissan Motor Co Ltd and its Chinese joint venture partner sold about 104,400 automobiles in China in October, down 9 percent from a year earlier, the Japanese carmaker said yesterday. That follows a 20 percent year-on-year decrease in September and a 0.7 percent dip in August. Nissan earlier yesterday said weakness in China, the world’s largest auto market, dragged on second-quarter earnings. The company’s China sales in the first 10 months of the year came to about 983,500 vehicles, up 3.5 percent from the same period a year earlier.

Beijing is confident it can host the 2022 Winter Olympics, an official said yesterday, after several withdrawals left the bid -- initially seen as a dry run for a future event -- the unlikely favourite. The Chinese capital’s candidacy has been viewed as highly ambitious, given concerns over pollution and transportation, and the lack of a widespread winter sports tradition or top-class facilities. But the Norwegian capital Oslo dropped out of the process last month, following earlier withdrawals by Stockholm, Krakow in Poland and Lviv in Ukraine.

Formal Abe-Xi talks at APEC unlike While Abe has visited about 50 countries since taking office in December 2012, he has failed to bring about a meeting with Xi amid historical disputes with China

J

apanese Prime Minister Shinzo Abe’s bid for formal talks with Chinese President Xi Jinping at a regional summit in Beijing next week is unlikely to succeed, a commentary

by China’s state-run Xinhua News Agency said.

The prospects for a first meeting between the two leaders during the Asia Pacific Economic Cooperation meeting had risen after Abe met Chinese Premier Li Keqiang in Milan last month. With relations between the two countries strained by spats over territory and Japan’s World War II legacy, Abe may have to make do with a welcome rather than the initiation of dialog, according to the Xinhua commentary published yesterday.

The article cited a string of what it termed provocations by the government in Tokyo during October, when three ministers and 110 lawmakers visited the Yasukuni Shrine, which honours Japan’s war dead, including some Class A war criminals. Abe also sent a ceremonial offering to the shrine and Chief Cabinet Secretary Yoshihide Suga questioned some details of the nation’s forcible recruitment of thousands of sex slaves from other Asian countries during WWII, it said.

aimed at avoiding unforeseen incidents.

Japan proposal

The moment hasn’t arrived yet for formal talks between China and Japan Jiang Lifeng, Institute of Japanese Studies at the Chinese Academy of Social Sciences

“It seems nothing more than a mere clumsy political stunt for the island country to advocate dialog and fence-mending with neighbours on the one hand, while sticking to the bigoted course of fomenting strife and misgivings on the other,” said the article, which appeared under the by-line of “Xinhua writer Zhu Dongyang.”

Island dispute While Abe has visited about 50 countries since taking office in December 2012, he has failed to bring

WB to launch emergency fund against Ebola

about a meeting with Xi amid historical disputes with China. Japan and China have been embroiled in a row over control of a group of uninhabited islands in the East China Sea known as Senkaku in Japanese and Diaoyu in Chinese.

Abe has mentioned his hopes for a bilateral meeting with Xi during APEC several times over the past few months, even as coast guard vessels and planes from both countries frequently tail one another around the disputed islands. The two countries in September resumed talks on a communication mechanism

A fund to revive Silk Road

Honda China sales fall

C

H

he World Bank is working with the International Monetary Fund, the United Nations and other multilevel developing banks to create an “epidemic emergency fund” to fight against Ebola and other epidemics in future, World Bank President Jim Yong Kim said here yesterday.

Kim told a press conference after a symposium that the fund will be like an insurance, with many billions of dollars, that would only come into existence if there is an outbreak of epidemic.

The fund, which would borrow money from global markets at very low rates, could finance the epidemic response and the response teams from all over the world and get an epidemic under control timely.

Kim, formerly a medical doctor and professor in public health, said if cases were caught early and intensive therapy can be provided, the survival rate from Ebola can be very high.

The World Bank chief said the vast majority of an epidemic impact from outbreaks was not usually due to the virus itself but “due to fears around the virus.”

hina plans a US$16.3 billion fund to finance construction of infrastructure linking domestic and overseas markets as President Xi Jinping pushes forward with his plans to revive the centuries old Silk Road trading route.

The money will be used to build and expand railways, roads and pipelines in Chinese provinces that are part of the strategy to facilitate trade over land and shipping routes, according to government officials who participated in drafting the plan.

The fund will mainly be overseen by China’s policy banks.

More policies will be rolled out soon to encourage Chinese lenders to finance infrastructure in countries along the route connecting China to Europe, said the officials. They asked not to be identified as they weren’t authorized to speak publicly about the plans. Chinese companies will also be urged to invest in the countries.

The New Silk Road plan, comprising a landbased belt and a maritime route, has been referred to as a Chinese national strategy after Xi first proposed the idea in Kazakhstan a year ago.

Xinhua

Bloomberg News

T

Japanese officials had made a three-point proposal to China in an effort to secure an Abe-Xi summit, the Mainichi newspaper said last month, citing several government officials. At any meeting, Abe would agree to say that although disputed islands in the East China Sea were Japanese territory, he was aware China had its own assertions and the two sides would hold talks to resolve the issue, the newspaper said.

Xi will “undoubtedly receive the Japanese leader with etiquette and hospitality, despite chronic territorial rows and historical feud with Tokyo,” the Xinhua commentary said.

“However, that does not necessarily mean Abe’s long-sought formal talks with Xi during APEC would come true.”

Japan’s cabinet yesterday approved a statement saying the nation had not made an agreement with China to stop senior ministers from visiting Yasukuni, Kyodo News reported.

Japanese Foreign Minister Fumio Kishida said nothing had been decided about bilateral meetings with China at APEC, either between ministers or leaders.

Bloomberg News

onda Motor Co Ltd’s said China sales fell for the fourth straight month in October, a downtrend that led the Japanese carmaker to cut its full-year forecast for sales in the world’s largest auto market by 10 percent.

Honda said it would revise its 2014 sales forecast for China down to about 800,000 vehicles from the around 900,000 vehicles previously forecast. It also said October sales had fallen nearly 6 percent year-on-year.

Sales growth in China’s auto market will halve to 7 percent this year weighed down by a slowing economy, the head of China’s automobile association has said.

Japanese auto brands have also been steadily losing market share in China to U.S. and European brands over the past six years, according to the China Passenger Car Association, as they suffer from political tensions between Beijing and Tokyo.

Honda and its two Chinese joint ventures sold 70,802 vehicles in China in October, down 5.8 percent from a year earlier, after a 23.1 percent fall in September.

Reuters